Question

A salary paid to a partner is reported as:

	A.	A deferred outflow, amortized to expense over time
	B.	A charge to dividends, a temporary account closed to partnership retained income
	C.	An expense, reducing partnership income
	D.	A reduction in his or her capital account

Answer 1

In a partnership, partners shares profit & loss in the pre defined ratio.

Partners are not issue pay checks to themselves, Salary to parters are just an arrangement to withdraw the funds on a monthly basis.

Salary to partners are not actual expenses for business, it is just withdrawal of profit by partners in a systematic way.

Hence when partner withdraws the amount as an salary, there should be reduction in his or her capital account as it is equivalent to drawings from business.

Option D is correct

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